This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.  
  • Delicious




Research Concludes Australia Must Do More To Combat Bracket Creep

by Mary Swire, Tax-News.com, Hong Kong

26 November 2004

Australia has one of the highest incidences of bracket creep and ‘fiscal stealth’ among member nations of the OECD, a University of Melbourne economics professor has concluded.

Presenting the results of his findings at the recent World Taxpayers and Taxpayers Australia Conference, Professor Neville Norman explained that taxpayers mistakenly believe that they are victims of bracket creep only when pay rises push them into higher tax brackets, when in reality they are being adversely affected by the process of fiscal stealth much more frequently.

According to Norman, this is the case because the average rate of tax payable on a person’s income increases even as they receive nominal pay rises, although the taxpayer feels no ‘real’ change in the amount of tax they pay.

Norman argued that the government has effectively built a mechanism into the tax scales that automatically increases the amount of tax paid by an individual without their necessarily being aware of this fact, a situation that he warned is leading to serious inequity and distortion in the tax system.

Endorsing the findings of Norman’s report, Peter McDonald, National Director of Taxpayers Australia, commented that:

“The elimination of the damaging effects of ‘creep’ are long overdue and the Government has a responsibility to be honest and truthful with taxpayers. Raising taxes through deceptive means does not fit that responsibility."

McDonald is calling on the government to reduce the top rate of personal income tax to 30% in line with corporate tax, thereby encouraging taxpayers to work longer, and making the tax system simpler and fairer.

“By giving taxpayers a greater incentive to earn and retain more of what they earn the anticipated problems of an ageing population will be eliminated,” he noted.

“Automatic indexation of the income thresholds must be introduced to eliminate insidious effects of bracket creep,” added Mr McDonald.

.

 

 






Write a comment